New Zealand Retail Sales Rise 0.5% QoQ, 2.3% YoY in Q2; PM Luxon Supports RBNZ Rate Cut Amid Inflation Concerns

New Zealand's retail sales unexpectedly rose by 0.5% quarter-on-quarter in the second quarter of 2025, exceeding forecasts of a 0.2% increase and previous growth of 0.8%. On a year-on-year basis, retail sales grew by 2.3%, up from 0.7% previously. This increase suggests that the Reserve Bank of New Zealand's (RBNZ) recent rate cut is beginning to support household spending and contribute to economic recovery. Prime Minister Christopher Luxon expressed personal agreement that the RBNZ should have cut the Official Cash Rate by 50 basis points last week, while emphasizing respect for the bank's independence on monetary policy. Luxon also highlighted the need for strong banking competition and addressed concerns about a two-speed economy, where major cities are falling behind. Finance Minister Nicola Willis indicated that a risk weighting review could lower farm costs. The RBNZ paid close attention to submissions from a banking inquiry, with Associate Governor Angus McGregor commenting on the matter. Luxon stated that his conversations with the RBNZ have been robust but not directive, and he plans to share his observations with the central bank. Analysts noted that the rate cut could be viewed favorably by former U.S. President Donald Trump, though concerns remain if inflation does not subside.